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Additional resources for Foundations of Decision Analysis

Example text

If you believe that the thumbtack is more likely to fall one way than the other, you are better off using the thumbtack. And I guarantee that it will never be a worse choice than the medallion. To demonstrate, we can convert the thumbtack deal into a medallion deal at no cost. Does anyone know how to do this? Sally: Yes. 1 can simply flip my own coin. If the result is heads, I call heads on the thumbtack. If the result is tails, I call tails on the thumbtack. I: Correct. To see this, suppose that the thumbtack has already been tossed, but no one had seen how it has fallen.

Most people would agree that the first deal is more attractive than the second, yet it has a lower chance of the best possible outcome, and a higher chance of the worst outcome. 8 • What is a Good Decision? Arno Penzias,4 a Nobel Laureate, was asked how he knew a good project when he saw one. " While this approach may sound like a reasonable criterion for project selection, closer examination reveals that it focuses only on the monetary outcome of 100% success and ignores other levels. In some cases, this answer would correspond to the best project, but in others, it may not.

We shall have much to say about the nature of this logic in what is to come. One important thing to understand about the stool metaphor is that the stool will collapse if you remove any of its legs. You have no decision to make if you have only one alternative, if you see no connection between any of your alternatives and the future, or if you are indifferent to the possible consequences. The location of the stool represents your decision frame, which determines the alternatives, information, and preferences that will be germane to your decision.